Marketing (Subject) / Product (Lesson)

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• 3 product (service) levels 1. core product benefits: functional features performance perceived value image technology 2. product attributes: brand name design packaging price country of origin staff behavior quality 3. support services: delivery installation guarantees after-sales service spare part services (repair, maintenance) core benefits easy to standardize ↓ support service difficult to standardize
• after-sales service (AS) key elements 7 + value of experience = integral part! = augmented product (Levitt) crucial to tailor offerings past shift!before: products often failed - maintenance and repairnow: enhanced technology - user training and online support Goffing and New (2001): 7 key elements 1. installationcomplex products or safety issues 2. user trainingmore in B2B - complexity 3. documentationequipment operation, installation, maintenance, repairgood documentation reduces service costs 4. maintenance and repairdowntime costs are really high - maintain before repair! 5. online supporttelephone, internet 6. warrantyreduce financial risk, purchase extended warranty 7. upgradesenhance the performance, eg computer upgrades
• advantages of the modularity approach (4) reduction of development time and cost:use the same assembly for different product parts reduction of variable costs:economies of scale producing larger amounts reduction of production investments:shared machinery, platform, tools, etc. reduction of risks:lower investment - reduced risk
• brand equity 5 categories (for measurement) = differential effect on customer response blind taste cola/pepsi or scoda carspositive or negative impact! Aaker - 5 categories of assets and liabilities 1991 1. brand loyaltybuy time after time 2. brand awarenessattract attention, image of familiarity 3. perceived qualitycustomer decides on level of quality, not the company 4. brand associationsvalues and personality linked to the brand 5. other proprietary brand assetstrademarks, patents, marketing channel relations → strong brand relationship qualitybrand & customer
• brand overview brand equity branding (storytelling) branding decisions brand - no brandprivate label, co-branding, own-brandsingle brand vs multiple brandslocal brand vs global brans
• branding - why storytelling - purpose of branding buying decision = rational & emotional brand = everything people know and feel about the brand why storytelling?continually changing marketcontinually develop your brand!!! common example = NIKE purpose of branding = create new sales, induce repeated sales differentiatecreate identification and brand awarenessguarantee certain level of satisfactionhelp with promotion of the product
• categories of service (3) people processing customer is part of the servicelocal geographic presence needededucation health food hotelnot globally standardizable (cultures) possession processing object needs to be involved in the process, not the persontangible actions to physical objectscar repairbetter possibilities of global standardization information based service collection interpreting and transmitting dataminimal tangibilityminimal customer involvementbanking, internet servicesvery good possibilities of global standardization (virtuality)
• Co-branding ingredient branding co-branding joint production or marketingNike and Apple iPod! ingredient branding branding by marketing componentsGoretex water-resistant fiber, Teflon non-stick coating, etc.
• full-service contract 2 dimensions full service = comprehensive bundle of products and/or services, that fully satisfies the needs and wants of a customer related to a specific event or problem (Stremersch 2001) full-service: 2 dimensions 1. bundling strategy- pure components (unbundled offer)high flexibility- mixed bundling (bundled or unbundled availability)high flexibility- pure bundlinglower flexibility - less decision-making needs 2. extension in need fulfillmentextent to which customer needs are fulfilled eg: Dell customize your PC+ cost saving - online pure player
• manufacturers own brand problem traditional: manufacturers push through the supply chain now:costumers pull! retailers become much more powerful!! private label quality was bad, now not anymore
• multiple convergent process model NPD (1) Baker an Hart 1999 - parallel processing internal tasks and external tasks must be carried out simultaneously and converge at some junctures→ multiple convergent points     - decision-stage unit     - action-stage unit growing interest in supplier and customer involvement in NPDcustomer - new product ideassupplier - innovation, JIT
• new products - international markets - cutting the time to markets - degrees of newness (4) increased international competition - SPEED shorter PLCsspeed up commercialization timeno more long-range plansreduce times for R&Dreduce time for marketing/sellingas good as necessary - don't over-optimize! too expensive from customers point of view degrees of newness 1. new to international marketsnew discoveries, revolutionary new design etc.very small proportion 2. new to the companyMicrosoft entered the gambling market with X-Box 3. line extensions'virgin soft drink energy' - coca-cola 4. reposition existing productsnew customer perception and branding
• NPD (new product development) 2 main approaches rapid change in customer tastes, technology, and global competition steady stream of new products and services - question marks! 2 possibilities:- acquisition (company, patent, license)- new product development in own R&D department 2 main approaches:- multiple convergent process model- product platform/modularity in NPD
• private label retailer (2 pro) manufacturer (2 pros, 3 cons) UK 60%southern Europe 10% = seller buys no-name product and sells under private label the retailers perspective (2 main advantages) 1. Own label provides better profit margin 2. Own label strengthen the retailer's image with its customers the manufacturers perspective + pro: limited resources (finfnacial&competencies) for downstream function (marketing) + pro: Go international (good opportunity) - con: uncertainty (compete mainly on price) - con: loss of control over promotion (problem if retailer works badly) - con: private label cannibalizes own brand (if both provided)
• product - overview we don't only sell the mere product, but the whole experienceeg: Harley Davidson: Harley Owners Group product product mix (depth and width)product levelsproduct differentiation - core, expected, augmented, potential service service: dimensions, characteristics, categoriesservice quality gapafter-sales servicefull service contracts NPD new product development (NDP)multi convergent process modelproduct platform/modularity in new product developmentthe product life cycle, its limitations, and levelsnew products for international marketsproduct cannibalization Brand brand equitybrandingbranding decisions
• product differentiation - different product/service levels Levitt 1986 - 4 levels 1.) core or generic offerwhat is the buyer really buying? - petrol 2.) expected offerwhat is expected with the offer? - toilets 3.) augmented offerextra features - full service (full up and windscreen wash) 4.) potential offerpetrol + free fill up every 5th time
• product cannibalization 3 conditions under certain conditions, pro-active cannibalization can be a sound strategy → ensures continual flow of new products→ resist instinct to preserve conditions for successful cannibalization 1. effective market sensing capabilities       profound knowledge about the market 2. internal competition across business units    encouraged innovation    managers compete for resources    coordinated by top management for outstanding performance 3. new product champions can influence corporate decisions    CEO central leadership roal in new product development Example: Gilette new razor Mach 3cannibalized old product, but won the market
• product line pricing cross elasticity different price steps to set between the items within a product line? - difference in costs- difference in perceived customer value necessary to know product price elasticity cross-elasticity positive cross-elasticity = substituteslowering the price of one product will decrease the demand for the othernegative cross-elasticity = complementary productslowering the price for one product will increase the demand for both productscareful consideration: Total profits are increased for the entire product line??? questions to ask: substitutes or complements?price change - enhance or retard usage rate of product(s)should new products be priced high at the outset to protect substitutes?use pricing also to indicate:- economy version- standard version- superior version
• product mix width, depth product item = single product product line = several product items product mix = several product lines in one organization product depth = how many product items has any line? product width =how many lines has the product mix decisions have to be consistent with:- product mix, lines- long-term marketing objectives
• product platform/modularity shared (4) NPD (2) = modular approach success factor in many markets = share components and production across product platform companies+ efficiently develop differentiated products+ flexibility and responsiveness+ take market share away from competitors that develop one product at a time + mass customization product modularity = design a platform: collection of assets that are shared by a set of products 1. Components part designsfixtures and tools neededcircuit designprogrammes burned into a chip 2. Process equipment usedproduction process designsupply chain 3. Knowledge design know howtechnology applications and limitationsproduction techniquesmathematical modelstesting methods 4. People and relationship teamsrelationships among team membersrelationships between teams and larger organizationrelationships with a network of suppliers
• service - overview characteristicscategoriesservice quality gapafter-sales servicefull service contracts
• service - overview 25% global merchandise trade = servicegrowing at double-digitsgrowing trendproduct + SERVICE characteristicscategoriesservice quality gapafter-sales servicefull-service contracts
• service characteristics (4) example = Airline intangibility:uncertainty before buying - you only have the ticketmake it tangible send right signals! perishabilitynot storableattempt to estimate demand! heterogeneityrarely the same serviceeg international differences inseparabilityproduction = consumptionprovided at point of salerarely economies of scale or experience curve effect
• service quality gap gap = mismatch of experience and perception what the customer just experienced didn't match what he was expecting good quality = very small or zero gap! expected service quality (before) marketing communicationadvertisingsales promotiondirect marketingPR/imagepersonal factorspersonal wants and needspast purchasing experience perceived service quality (after) technical qualityWHAT customer receives (Hotel room, transport, delivery)functional qualityHOW and WHERE the customer receives it (more subjective)where determines the how - eg restaurant
• stages of family life cycle (9) often used by holiday firms! 1. Bachelor: Young, single, not living at parents house= minor financial burdens, recreation orientated, entertainment outside the house 2. NewlywedYoung couples, no children=better off financially, two incomes, purchase a home, some consumer durables 3. Full nest IYoung child under 6=home purchasing zenith, increasing financial stress, may have only one income, predominately purchase of necessities 4. Full nest IIYoungest child over 6financial position recovering, some working spouses 5. Full nest IIIolder married couples with dependent children=financial better still; update household products and furniture 6. Empty nest Iolder married couples, no children at home=home ownership summit, renewed interest in travel and leisure activities, buy luxuries 7. Empty nest IIolder couples, no children at home, retired=partially drastic cut in income, medical services bought 8. Solitary survivor: still in labor force= income fine, but likely to sell home 9. Solitary survivorretired= special needs for medical care, affection, and security
• the product life cycle (PLC) - 4 stages 1. Introduction period of slow salesno profitslarge expenses for product introduction 2. growth rapid market acceptanceincreasing profitsnew competitor enter market because of high profit potentialend of this stage: competitive shakeout 3. maturity achieved acceptance by most buyersslowdown in salessaturation -> competitors shakeoutremaining companies: fierce battleimprovements, price cutting, advertising, promotional offers -> strain on profit marginsneed for successful brand building!4. decline new technology or changing customer tastesend production or reduce product depthadvertising to protect
• the product life cycle (PLC) - levels whole industryproduct form (technological life cycle)product itemetc. example battle VHS-system
• the product life cycle (PLC) - limitations (3) misleading strategy prescriptions PLC is dependent variable!!! Depends on marketing mixdon't react to PLC - self-fulfilling prophecydeclining? increase marketing support- product improvement- reposition perception- research new users- promote more frequent use- promote new use fads = adopted very quickly - decline very quicklynot all products follow the classic PLC curve unpredictability durations of the curve = unpredictablemay appear to be mature, when it's only on a temporary growth plateau
• 4 levels of branding decisions brand vs no brand?no brand = commodities (cement, metals, salt, beef, agricultured products) private label --- co-branding --- manufacturers own brand? Private label = labeled by retailerco-branding = joint product or marketingingredient branding = components (Goretex)own brand = manufacturers own brand single brand or multiple brands? single brand = full attention, max. impactmultiple brands = heterogeneous markets, serve different segments+ much more market share+ careful when segments are not profitable enough local brand or global brand? international/universal brands (Levis)or local brands - in most casesgood international reputation?wise to use global brand!

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